Microfinance Ireland Report on The Microenterprise Loan Fund … · 2017-02-21 · Microfinance...

Microfinance Ireland

Report on The Microenterprise Loan Fund Scheme

as at 31th December 2016

This financing benefits from a guarantee issued under the ‘European Progress

Microfinance Facility’ and the ‘Employment and Social Innovation Guarantee Facility’

established by the European Union.

Microfinance Ireland Quarterly Report Q4 2016

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Contents

Overview of the Microenterprise Loan Fund Scheme……………………………………………………………………............ 2

Performance in 2016………………………………………………………………………………………………………………………….........2

Promotional Activities in 2016…………………………………………………………………………………………………………...........3

Fund performance 2012-2016 ……………………………………………………………………………………………………………..…….4

Microenterprise Fund since October 2012…………………………………………..........……………………………................ 5

Applications by quarter………………………………………………………………………………………………………………….5 Monthly growth Trend………………………………………………………………………………………………………………..…5 Applications processed………………………………………………………………………………………………………………….6 Approvals by size of Borrower………………………………………………………………………………………….…………...6 Approvals by Loan Size……………………………………………………………………………………………………………...…..7 Purpose for which Microfinance Loans were granted…………………………………………………………………...7 Geographical Analysis of Approvals……………………………………………………………………………………………….8 Approval by Business Sector…………………………………………………………………………………………..…………..…9 Demographical Analysis……………………………………………………………………………………………………………….10 Appeals Process……………………………………………………………………………………………………………………………….........11

Business Failures…………………………………………………………………………………………………………………………………...…11

Source of Loan Referrals……………………………………………………………………………………………………………….…….……12


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Overview of the Microenterprise Loan Fund Scheme

The Microenterprise Loan Fund, administered by Microfinance Ireland is part of the Government’s Action Plan for

Jobs and forms part of a suite of financial programs provided through the Department of Jobs, Enterprise and

Innovation to assist businesses in a range of sizes across all industry sectors.

The purpose of the Fund is to provide loans of €2,000 up to €25,000 to Micro-enterprises (Microenterprises are

defined as businesses with less than 10 employees and /or Turnover <€10m) who cannot obtain funding through

traditional sources.

Performance in 2016

In 2016, Microfinance Ireland experienced continued strong growth with applications volumes in the year up 15%.

The number of approved loans is also positive compared to last year, up 11%. Overall value of total loans approved

was flat (€5.5m in both 2015 and 2016) due to a reduction in average size of loan requested. In total, 397 micro-

enterprises had loans approved through the Microenterprise Loan Fund Scheme in 2016.

These approved loans created or sustained 990 jobs.

Of the 902 loans processed during the year, 180 applications were withdrawn by the applicants during the initial

assessment. Excluding application withdrawals, 397 were approved representing 55% of loans brought to full

decision (or 44% of overall applications processed).

In the latter half of 2016, approval rates declined somewhat as significant focus has been placed on ensuring that

bad debts are managed within expected levels.

Work-in–progress at year end accounted for 24 applications.

Summary in 2016

861 Applications received

€5.4M Value of loans approved

€4.3M Value of loans drawn

990 Jobs supported in 397 micro-enterprises

330 loans drawn

44% Approval rate

Average Loan size of €14K

82 % approvals granted to businesses employing 3 people or fewer

52 % of approvals granted to start-ups (in business for less than 18 months)

Wide geographic coverage: 18 % of loans granted to Dublin, 82 % remainder of

Ireland


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Promotion of the MFI Loan Fund Scheme during 2016

There was a strong focus on advertising, promotion and engagement with key stakeholders during 2016 across a broad range of marketing activities, with a particular emphasis being placed on PR and digital media. A key milestone was achieved in July with the reduction of our interest rate by 1%, which resulted in very positive PR across national press and digital media. This was followed with extensive communication, promotion and advertising on social media by MFI and Local Enterprise Offices to promote the new headline rate which is currently broadly aligned with commercial lending providers. A significant deliverable was the rebranding of MFI, including the launch of a revised product offering, new website, logo and associated marketing material. The combined impact creates better clarity of our offering, customer focused product propositions through a more real ‘look and feel’ to our marketing, featuring customer graphics and more customer success stories that better resonate with our target market. The website also contains additional information and all the necessary documentation to support customers with their applications. To date feedback has been very positive from a broad range of customers and stakeholders. MFI also increased its activities on Social Media during the year and these activities continue to draw a growing amount of traffic to our website and social media pages, with increased level of queries to the business. MFI continued to maintain strong relationships with all our referral partners including the LEOs. We regularly attended Heads of LEO meetings and quarterly review meetings with EI Co-ordination Unit to review ongoing performance with a view to maximising business volumes. Regular marketing updates are provided to LEOs on an ongoing basis with relevant MFI content for inclusion in their Newsletters/eZines. MFI also continued to work with the Irish Local Development Network (ILDN), who deal with a large number of clients who are moving to self-employment and are on the Back to Work Enterprise Allowance (BTWEA). A number of MFI workshops were held with ILDN Enterprise Officers in a number of locations across the country during the year. MFI were also the exclusive sponsor of the inaugural ILDN National Enterprise Awards which were held in Dublin in September. 2016 saw significant progress in relation to the Bank Channel, consisting of Bank of Ireland, AIB and Ulster Bank. The level of Bank Leads (Referrals) has increased significantly since May 2016 with 361 referrals made to MFI during the year. Engagement with the Banks is ongoing with a view to building a steady pipeline of leads from all the Banks on an ongoing basis. MFI staff continued to attend events around the country to promote MFI’s offering and increase overall brand awareness. Presentations and speaking opportunities were optimised at a large number of events including, National Enterprise Week, ‘Jobs Week’ (Department of Social Protection initiative), Ignite Academy’s Self Employment Programme, and a large number of business seminars and events covering each region of the country.


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Fund Performance: 1st October 2012 to 31st December 2016

As at year end 2016, Microfinance Ireland has been in business for 4.25 years. In this time, it has delivered the

following key results:

Successful applicants by sector:

WHOLESALE AND RETAIL TRADE; REPAIR OF MOTOR VEHICLES AND MOTORCYCLES (23%)

MANUFACTURING (13%)

ARTS, ENTERTAINMENT AND RECREATION (8%)

CONSTRUCTION (8%)

ACCOMMODATION & FOOD SERVICE ACTIVITIES

(7%)

ADMINISTRATION & SUPPORT SER. ACTIVITIES

(6%)

INFORMATION AND COMMUNICATION (6%) TRANSPORT/STORAGE (6%)

PROFESSIONAL, SCIENTIFIC & TECH ACTIVITIES (5%)

OTHER SERVICES (5%)

AGRICULTURE, FORESTRY & FISHING (4%) OTHER (3%)

HUMAN, HEALTH AND SOCIAL WORK (3%) EDUCATION (3%)

Assessing applications efficiently:

2,500 Applications received

€17.1M Value of loans approved

€14.2M Value of loans drawn

2,811 Net jobs supported in 1167 micro-enterprises

995 Loans drawn

47% Approval rate

Average Loan size of €15K

74 % approvals granted to businesses employing 3 people or fewer

56 % of approvals granted to start-ups (in business for less than 18 months)

Wide geographic coverage: 21 % of loans granted to Dublin,79 % to the rest of

Ireland

2,476 Applications processed to full assessment

24 Applications in progress at reporting date

Endeavour to process complete applications within 10 days


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Microfinance Fund since inception (October 2012)

Applications by Quarter

Total Applications Received

2013 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Total

Total Applications 379 €6.739M 508 €8.451 196 €3.252M 173 €2.799M 189 €3.308M 194 €2.958M 187 €2.965M 223 €3.579M 226 €3.719M 225 €3.304M 2,500 €41.074M

Total Applications Processed

2013 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Total

Applications Processed 348 483 193 190 161 199 201 215 237 249 2476

Approved 139 274 101 92 83 81 97 109 86 105 1167

Approval Rate 40% 57% 52% 48% 52% 41% 48% 51% 36% 42% 47%

Approved (€'000) 2,159 4,159 1,506 1,479 1,310 1,083 1,387 1,520 1,163 1,322 17,088

(1st Octber 2012 to

31st December 2016)

(1st Octber 2012 to

31st December 2016)

** From time to time an application is approved in a quarter and the promoter may choose to withdraw following approval but prior to drawing down. This can result in revisions to previously published quarter-end figures.

Monthly Growth Trend

Application and approval activity levels by month are displayed in the graph below:


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Size of Borrower

Loans were approved to micro-enterprises with the following number of employees at time of approvals:

Total Approvals Received

No. of Employees 2013 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Total

1 60 141 60 46 43 38 52 67 51 65 558

2-3 56 86 28 28 18 23 25 24 17 25 305

4-5 16 22 9 6 9 9 11 11 15 8 108

6-9 10 25 4 12 13 11 9 7 3 7 94

10-50

Prior period adj -3 0 -3

Total No. of Loans 139 274 101 92 83 81 97 109 86 105 1167

Average No. of Jobs

per Loan2.6 2.2 2.4 2.4 2.1 3.6 1.9 1.7 1.6 2.2 2.4

(1st Octber 2012 to

31st December 2016)


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Activity by Loan Size

From 1st October 2012 to 31st December 2016, loans were granted in the following size range.

Euro No. of Loans

≤25k 355

≤20k 136

≤15k 194

≤10k 232

≤5k 250

Total 1167

Average loan size €15K

Purpose for which Microfinance Loans were granted

Loans were granted for the following purposes:

Working Capital

Fit-out of Premises

Purchase of Equipment

Information & Communications Technology

Promotion and Marketing


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Geographical Analysis of Approvals

Geographical Spread – from 1st October 2012 to 31st December 2016

Geographical Spread

County Received Approved County Received Approved

Dublin 546 247 Louth 70 22

Cork 213 89 Mayo 69 44

Meath 121 51 Westmeath 69 32

Limerick 121 59 Laois 63 26

Tipperary 117 55 Longford 63 28

Galway 106 55 Roscommon 54 28

Wexford 94 50 Carlow 50 23

Waterford 90 40 Sligo 49 36

Kildare 87 43 Donegal 48 21

Cavan 80 38 Offaly 44 20

Wicklow 80 38 Monaghan 42 15

Kerry 73 30 Kilkenny 42 19

Clare 72 39 Leitrim 37 19

Total Applications Received: 2,500

Total Applications Approved: 1,167


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Approval by sectors


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Demographical analysis

Borrowers legal status

443 microfinance loans were granted to Private Limited Companies

638 Sole Traders were granted a microfinance loan

86 Microfinance loans were granted to Partnerships

Start-Up/Existing

Of the 1,167 loans approved, 650 were start-up enterprises (<18 months) and 517 to existing enterprises

Gender Breakdown

Of the total applications received 76% (1896) were from male promoters and 24% (604) from female promoters. Of

the loans approved as at 31st December 2016, 74% (869) were to male promoters while 26% (298) were to female

promoters.

Youths

There were 28 loans approved to young entrepreneurs comprising 2% of all the applications approved to date.

Approved Applications Volume Value

Total Approved 1,167 17.088M

Start-Up (<18 months) 650

Existing 517

No. of Ltd. Co. 443

No. of Sole Traders 638

No. of Partnerships 86

Female 298

Male 869

Youth (18-25 years old) 28


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Appeals Process The purpose of the Microfinance Ireland appeals process is to support an applicant who wishes to have a review of an MFI decision to decline a loan application.

MFI will appoint an Appeal Assessor to carry out an independent review of the original loan decision. The assessor who was involved in the original decision will not be involved in the appeals process. The outcome of this review is communicated in writing to the applicant within 15 business days of receipt of the written appeal. The credit decision of the Appeal Assessor is independent of MFI management and is final. There have been 139 appeals from inception to 31st December 2016 and 27 of these cases have been approved on appeal (19%). These figures are included in the overall approval figures.

Business Failures

Up to end December 2016, 125 businesses of the 995 loans approved and drawn have failed. While any business failure is regrettable, it was anticipated from the outset that a not insignificant proportion of projects supported by the Microfinance Ireland might fail. It is a feature of microfinance (given the higher risk profile) that even with strong business supports, failures will occur. On an ongoing basis, Microfinance Ireland, in conjunction with other agencies, works with every customer at risk to minimise business failure.


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Source of Loan Referrals:

Local Enterprise Offices (formerly County and City Enterprise Boards)

Microfinance Ireland’s main referral partners are the Local Enterprise Offices (LEOs). To date, 1,232 of our loan

applications were received from the LEOs accounting for 49% of all of our applications. Of these applications

received from the LEOs, 1,219 were fully processed by the 31st December 2016 resulting in 647 being approved

giving an approval rate of 53%. The LEOs also support MFI applicants with their application, relevant business

training and both pre and post loan mentoring assistance.

Direct Applications

While the LEOs remain our primary referral partners there has been a steady flow of applications direct from

enterprises, both existing and new businesses, seeking credit. In the period from inception Microfinance Ireland has

received 1,268 applications directly which equates to 51% of all applications. Of the applications received directly,

1,257 were fully processed by the 31st December 2016 resulting in 520 being approved giving an approval rate of

42%.

Banks

The bank channel, consisting of Bank of Ireland, AIB & Ulster Bank, continues to refer growing numbers of leads. In

the year 361 leads were received between the 3 banks. Engagement is on-going with each Bank and training with

business teams has now been completed with each. This relationship will be reviewing regularly in order to ensure a

consistent flow of leads and applications from each Bank in the future.

ILDN

MFI continues to work with the Irish local Development network (ILDN), who deal with a large number of clients who

are moving to self-employment and are on the Back to Work Enterprise Allowance (BTWEA). While volumes are low,

we continue to ensure all the Local Development Companies and Area Partnerships are fully aware of MFI’s offering

and how it can benefit their clients who may require funding for their business.

Microfinance Ireland Report on The Microenterprise Loan Fund … · 2017-02-21 · Microfinance...

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